You have an 8-year certificate of deposit that pays an annual rate of 5.3%. At the end of 5 years, you cash out the $6, 000 CD and must pay a penalty of 11 months simple interest. What penalty did you pay?

BUSINESS MATHEMATICS

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Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]

You have an 8-year certificate of deposit that pays an annual rate of 5.3%. At the end of 5 years, you cash out the $6, 000 CD and must pay a penalty of 11 months’ simple interest. What penalty did you pay?

A	$295.50
B	$291.50
C	$300
D	$294.50

Explanation:

Detailed explanation-1: -Annual percentage yield (APY) is calculated by using this formula: APY= (1 + r/n )n n – 1. In this formula, “r” is the stated annual interest rate and “n” is the number of compounding periods each year. HOW MUCH INTEREST CAN YOU EARN ON A CD?

Detailed explanation-2: -For example, if an investment scheme promises an 8% annual compounded rate of return, it will take approximately nine years (72 / 8 = 9) to double the invested money.

Detailed explanation-3: -CDs shall be issued in minimum denomination of ₹5 lakh and in multiples of ₹5 lakh thereafter. The tenor of a CD at issuance shall not be less than seven days and shall not exceed one year.

Detailed explanation-4: -A jumbo CD is like a regular CD but requires a higher minimum deposit, and in exchange, it can pay a higher interest rate. Jumbo CDs usually require a deposit of at least $100, 000, though some banks may require less.

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